State Transportation Agency Proposes $85 Million Deficit Budget for 2014-15

August 20, 2013

Investigative Reports

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Road WorkTwo summers ago, the S.C Department of Transportation was so short on cash that it couldn’t pay contractors and had to get a $52 million advance from the federal government to help cover its obligations.

These days, the 4,400-employee agency apparently is feeling good enough about its finances that it is proposing to run a nearly $85 million deficit for fiscal 2014-15, making up the shortfall with cash reserves it projects to have on hand at the start of the fiscal year next July 1.

“It’s not a balanced budget, if you will,” Julio Arana, the agency’s director of budget and financial planning, told the DOT Commission during the commission’s Finance Committee meeting Thursday, though he added, “We’re not going to be running this ship into the ground with this budget request.”

The Finance Committee, made up of four members of the eight-member commission, approved the budget proposal, which calls for $1.632 billion in expenditures and $1.547 billion in revenues for the fiscal year that runs from July 1, 2014, through June 30, 2015. The $84.9 million estimated shortfall would be covered with a projected $85.4 million in cash reserves, Arana said.

“We had the same situation this year,” he told commissioners. This fiscal year’s total ratified agency budget is $1.58 billion, state budget records show.

Documents provided for Thursday’s meeting noted that expenditures for 2014-15 are “forecasted to exceed” revenues, which will “require utilization of cash carry forward.”

The commission approved the budget request without debate at its regular meeting later Thursday. The agency’s spending plan will be considered by Gov. Nikki Haley as she prepares her proposed executive budget for the General Assembly to consider when it returns to session in January.

The S.C. Constitution requires that the 170-member Legislature pass a balanced state budget. The total state budget, which includes general, federal and “other” funds, for this fiscal year is more than $24.2 billion, including $1.5 billion in federal food-stamp assistance funds transferred to an “unbudgeted account.”

State law requires agencies to submit their proposed budgets for the upcoming fiscal year to the governor – in recent years by way of the Office of State Budget – by Nov. 1. As The Nerve has previously reported, the House of Representatives has routinely ignored the law for its own chamber budget, and the Senate did the same until last year after The Nerve exposed the practice.

Lawmakers also have ignored another law that requires the budget-writing committees of both chambers to hold joint public hearings on the governor’s proposed budget for the upcoming fiscal year, beginning within five days after the executive spending plan is submitted to the Legislature.

As for the Department of Transportation, the agency started fiscal 2012 – July 1, 2011 – with $33.6 million in “other” fund reserves and $3.9 million in general fund reserves, state budget records show. But by the middle of August 2011, it had about $120 million in immediate outstanding debts, according to media reports, with contractors publicly complaining that they weren’t getting paid.

Transportation Secretary Robert St. Onge, who was appointed by Haley, said at the time the problem resulted primarily from flat state gasoline tax collections, and the agency handling too many construction projects at once and not adequately budgeting for expenses. He said a $52 million federal advance would allow the agency to catch up paying contractors that summer.

The department apparently turned around its cash-flow problems, starting last fiscal year with nearly $93 million in “other” fund reserves and $1.2 million in general fund reserves, state budget records show.

No figures were immediately available Thursday on how much the agency had in reserves when it started this fiscal year on July 1.

Documents provided for Thursday’s Finance Committee meeting show that the $1.547.4 billion in projected revenues for the 2014-15 fiscal year would be made up of $889.8 million, or 57 percent of the estimated total, in federal funds; $550.4 million, or 36 percent of the total, in “other” funds, consisting mainly of state gasoline taxes; and $107.2 million, or 7 percent of the total, in general funds.

The general fund portion includes $50 million that would be transferred to the S.C. Transportation Infrastructure Bank, the same amount the Legislature authorized for this fiscal year for the Infrastructure Bank to use to leverage at least $500 million in bonds for interstate highway projects; and a $52.5 million proposed allocation to build an access road for a state ports expansion project, Arana said during the meeting.

The department also is projecting to receive $41 million in car sales taxes for 2014-15 – as lawmakers authorized for this fiscal year – for road improvement projects, and plans on using $30 million of $50 million in surplus general funds from last fiscal year for bridge projects, according to documents provided for the meeting.

Arana said no change is projected in total budgeted salaries for agency employees in fiscal 2014-15, though Commissioner Clifton Parker questioned why the agency is proposing a 14 percent increase in classified administrative positions, noting a $4.2 million net transfer from the highway engineering section to general administration.

“When you create a position in highway engineering, does that translate to more work on the streets versus the classified position in administration?” Parker asked Arana.

Arana replied that IT functions that are spread through the agency’s districts would be consolidated in general administration, as would some planning functions currently handled by the engineering section.

“In no means does it detract from our ability to, in our minds, to put the program on the street,” Arana said.

Reach Brundrett at (803) 254-4411 or rick@thenerve.org. Follow him on Twitter @thenerve_rick. Follow The Nerve on Facebook and Twitter @thenervesc.